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New version is at:

jobs.netflix.com/culture

1
 Netflix Culture:
Freedom & Responsibility

2
 We Seek Excellence

Our culture focuses on helping us

achieve excellence

3
 Seven Aspects of our Culture
Values are what we Value
High Performance
Freedom & Responsibility
Context, not Control
Highly Aligned, Loosely Coupled
Pay Top of Market
Promotions & Development

4
Many companies have nice sounding
value statements displayed in the
lobby, such as:

Integrity
Communication
Respect
Excellence

5
 Enron, whose leaders went to jail,
and which went bankrupt from fraud,
had these values displayed in their lobby:

Integrity
Communication
Respect
Excellence

(These values were not, however, what was really valued at Enron)
6
 The actual company values,
as opposed to the
nice-sounding values,
are shown by who gets
rewarded, promoted, or let go

7
Actual company values are the
behaviors and skills
that are valued
in fellow employees

8
At Netflix, we particularly value the
following nine behaviors and skills
in our colleagues

meaning we hire and promote

people who demonstrate these nine

9
 You make wise decisions
(people, technical, business, and
creative) despite ambiguity

You identify root causes, and get

Judgment beyond treating symptoms

You think strategically, and can

articulate what you are, and are
not, trying to do

You smartly separate what must

be done well now, and what can
be improved later

10
 You listen well, instead of
reacting fast, so you can better
understand

You are concise and articulate in

Communication speech and writing

You treat people with respect

independent of their status or
disagreement with you

You maintain calm poise in

stressful situations

11
 You accomplish amazing
amounts of important work

You demonstrate consistently

strong performance so
Impact colleagues can rely upon you

You focus on great results rather

than on process

You exhibit bias-to-action, and

avoid analysis-paralysis

12
 You learn rapidly and eagerly

You seek to understand our

strategy, market, customers, and
suppliers
Curiosity You are broadly knowledgeable
about business, technology and
entertainment

You contribute effectively

outside of your specialty

13
 You re-conceptualize issues to
discover practical solutions to
hard problems

You challenge prevailing

Innovation assumptions when warranted,
and suggest better approaches

You create new ideas that prove

useful

You keep us nimble by

minimizing complexity and
finding time to simplify

14
 You say what you think even if it
is controversial

You make tough decisions

without agonizing
Courage You take smart risks

You question actions

inconsistent with our values

15
 You inspire others with your
thirst for excellence

You care intensely about

Netflixs success
Passion You celebrate wins

You are tenacious

16
 You are known for candor and
directness

You are non-political when you

disagree with others
Honesty You only say things about fellow
employees you will say to their
face

You are quick to admit mistakes

17
 You seek what is best for Netflix,
rather than best for yourself or
your group

You are ego-less when searching

Selflessness for the best ideas

You make time to help

colleagues

You share information openly

and proactively

18
 Seven Aspects of our Culture
Values are what we Value
High Performance
Freedom & Responsibility
Context, not Control
Highly Aligned, Loosely Coupled
Pay Top of Market
Promotions & Development

19
Imagine if every person at Netflix
is someone you
respect and learn from

20
 Great Workplace is
Stunning Colleagues
Great workplace is not espresso, lush benefits,
sushi lunches, grand parties, or nice offices

We do some of these things, but only if they are

efficient at attracting and retaining
stunning colleagues

21
Like every company,
we try to hire well

22
 Unlike many companies,
we practice:

adequate performance gets a

generous severance package

23
 Were a team, not a family

Were like a pro sports team,

not a kids recreational team

Netflix leaders
hire, develop and cut smartly,
so we have stars in every position

24
The Keeper Test Managers Use:
Which of my people,
if they told me they were leaving,
for a similar job at a peer company,
would I fight hard to keep at Netflix?

25
The other people should get a generous severance now,
so we can open a slot to try to find a star for that role

The Keeper Test Managers Use:

Which of my people,
if they told me they were leaving,
for a similar job at a peer company,
would I fight hard to keep at Netflix?

26
 Honesty Always
As a leader, no one in your group
should be materially surprised of
your views

27
 Honesty Always

Candor is not just a leaders responsibility,

and you should periodically ask your
manager: If I told you I were leaving, how
hard would you work to change my mind?

28
 All of Us are Responsible
for Ensuring We Live our Values
You question actions inconsistent with our
values is part of the Courage value

Akin to the honor code pledge:

I will not lie, nor cheat, nor steal,
nor tolerate those who do
29
Pro Sports Team Metaphor is
Good, but Imperfect
Athletic teams have a fixed number of
positions, so team members are always
competing with each other for one of
the precious slots

30
 Corporate Team
The more talent we have,
the more we can accomplish,
so our people assist each other all the time

Internal cutthroat or sink or swim

behavior is rare and not tolerated

31
We Help Each Other
To Be Great

32
 Isnt Loyalty Good?
What about Hard Workers?
What about Brilliant Jerks?

33
 Loyalty is Good
Loyalty is good as a stabilizer
People who have been stars for us, and hit a bad
patch, get a near term pass because we think
they are likely to become stars for us again
We want the same: if Netflix hits a temporary
bad patch, we want people to stick with us
But unlimited loyalty to a shrinking firm, or to an
ineffective employee, is not what we are about

34
 Hard Work Not Relevant
We dont measure people by how many hours
they work or how much they are in the office
We do care about accomplishing great work
Sustained B-level performance, despite A for
effort, generates a generous severance
package, with respect
Sustained A-level performance, despite
minimal effort, is rewarded with more
responsibility and great pay
35
 Brilliant Jerks
Some companies tolerate them
For us, cost to effective teamwork is too high
Diverse styles are fine as long as person
embodies the 9 values

36
Why are we so insistent on
high performance?
In procedural work, the best are 2x
better than the average.
In creative/inventive work, the best are 10x
better than the average, so huge premium on
creating effective teams of the best

37
Why are we so insistent on
high performance?
Great Workplace is
Stunning Colleagues

38
 Our High Performance Culture
Not Right for Everyone
Many people love our culture, and stay a long time
They thrive on excellence and candor and change
They would be disappointed if given a severance package,
but lots of mutual warmth and respect
Some people, however, value job security and stability
over performance, and dont like our culture
They feel fearful at Netflix
They are sometimes bitter if let go, and feel that we are
political place to work
Were getting better at attracting only the former, and
helping the latter realize we are not right for them

39
 Seven Aspects of our Culture
Values are what we Value
High Performance
Freedom & Responsibility
Context, not Control
Highly Aligned, Loosely Coupled
Pay Top of Market
Promotions & Development

40
 The Rare Responsible Person
Self motivating
Self aware
Self disciplined
Self improving
Acts like a leader
Doesnt wait to be told what to do
Picks up the trash lying on the floor

41
 Responsible People
Thrive on Freedom,
and are Worthy of Freedom

42
 Our model is to increase
employee freedom as we grow,
rather than limit it,
to continue to attract and nourish
innovative people,
so we have better chance of
sustained success

43
 Most Companies
Curtail Freedom as they get Bigger

Bigger

Employee Freedom

44
Why Do Most Companies
Curtail Freedom
and Become Bureaucratic
as they Grow?

45
Desire for Bigger Positive Impact
Creates Growth

Growth

46
Growth Increases Complexity

Complexity

47
Growth Also Often Shrinks Talent Density

Complexity

% High Performance Employees

48
 Chaos Emerges

Chaos and errors spike here business

has become too complex to run
informally with this talent level Complexity

% High Performance Employees

49
Process Emerges to Stop the Chaos

Procedures
No one loves process, but
feels good compared to the
pain of chaos

Time to grow up becomes

the professional managements
mantra

50
Process-focus Drives More Talent Out

% High Performance Employees

51
 Process Brings Seductively Strong
Near-Term Outcome
A highly-successful process-driven company
With leading share in its market
Minimal thinking required
Few mistakes made very efficient
Few curious innovator-mavericks remain
Very optimized processes for its existing market
Efficiency has trumped flexibility

52
 Then the Market Shifts
Market shifts due to new technology or
competitors or business models
Company is unable to adapt quickly
because the employees are extremely good at
following the existing processes, and process
adherence is the value system
Company generally grinds painfully into
irrelevance

53
 Seems Like Three Bad Options
1. Stay creative by staying small, but therefore
have less impact
2. Avoid rules as you grow, and suffer chaos
3. Use process as you grow to drive efficient
execution of current model, but cripple
creativity, flexibility, and ability to thrive
when your market eventually changes

54
 A Fourth Option
Avoid Chaos as you grow with Ever More High
Performance People not with Rules
Then you can continue to mostly run informally
with self-discipline, and avoid chaos
The run informally part is what enables and
attracts creativity

55
The Key: Increase Talent Density faster
than Complexity Grows

56
Increase Talent Density

Top of market compensation

Attract high-value people through
freedom to make big impact
Be demanding about high
performance culture

57
 Minimize Complexity Growth

Few big products vs many small ones

Eliminate distracting complexity (barnacles)
Be wary of efficiency optimizations that
increase complexity and rigidity

Note: sometimes long-term simplicity is

achieved only through bursts of complexity to
rework current systems
58
 With the Right People,

Instead of a
Culture of Process Adherence,

We have a Culture of
Creativity and Self-Discipline,
Freedom and Responsibility

59
Is Freedom Absolute?

Are all rules & processes bad?

60
Freedom is not absolute

Like free speech

there are some
limited exceptions to
freedom at work

61
 Two Types of Necessary Rules
1. Prevent irrevocable disaster
Financials produced are wrong
Hackers steal our customers credit card info
2. Moral, ethical, legal issues
Dishonesty, harassment are intolerable

62
 Mostly, though, Rapid Recovery is
the Right Model
Just fix problems quickly
High performers make very few errors
Were in a creative-inventive market, not a
safety-critical market like medicine or nuclear
power
You may have heard preventing error is
cheaper than fixing it
Yes, in manufacturing or medicine, but
Not so in creative environments

63
 Good versus Bad Process
Good process helps talented people get more done
Letting others know when you are updating code
Spend within budget each quarter so dont have to
coordinate every spending decision across departments
Regularly scheduled strategy and context meetings
Bad process tries to prevent recoverable mistakes
Get pre-approvals for $5k spending
3 people to sign off on banner ad creative
Permission needed to hang a poster on a wall
Multi-level approval process for projects
Get 10 people to interview each candidate

64
 Rule Creep
Bad processes tend to creep in
Preventing errors just sounds so good
We try to get rid of rules when we can, to
reinforce the point

65
Example: Netflix Vacation Policy
and Tracking
Until 2004 we had the standard
model of N days per year

66
 Meanwhile

Were all working online some nights and

weekends, responding to emails at odd
hours, spending some afternoons on
personal time, and taking good vacations

67
An employee pointed out

We dont track hours worked per day

or per week, so why are we tracking
days of vacation per year?

68
 We realized

We should focus on what people get done,

not on how many days worked
Just as we dont have an 9am-5pm workday
policy, we dont need a vacation policy

69
Netflix Vacation Policy
and Tracking
there is no policy or tracking

70
Netflix Vacation Policy
and Tracking
there is no policy or tracking

There is also no clothing policy at Netflix,

but no one comes to work naked

Lesson: you dont need policies for everything

71
No Vacation Policy Doesnt Mean
No Vacation
Netflix leaders set good examples by
taking big vacations and coming
back inspired to find big ideas

72
Another Example of Freedom
and Responsibility

73
 Most companies have complex
policies around what you can
expense, how you travel, what gifts
you can accept, etc.

Plus they have whole departments

to verify compliance
with these policies

74
 Netflix Policies
for Expensing, Entertainment,
Gifts & Travel:
Act in Netflixs Best Interest

(5 words long)

75
 Act in Netflixs Best Interest
Generally Means
1. Expense only what you would otherwise not
spend, and is worthwhile for work
2. Travel as you would if it were your own money
3. Disclose non-trivial vendor gifts
4. Take from Netflix only when it is inefficient to
not take, and inconsequential
taking means, for example, printing personal
documents at work or making personal calls on work
phone: inconsequential and inefficient to avoid

76
 Freedom and Responsibility
Many people say one cant do it at scale
But since going public in 2002, which is
traditionally the end of freedom, weve
substantially increased talent density and
employee freedom

77
 Summary of
Freedom & Responsibility:

As We Grow, Minimize Rules

Inhibit Chaos with Ever More

High Performance People

Flexibility is More Important

than Efficiency in the Long Term

78
 Seven Aspects of our Culture
Values are what we Value
High Performance
Freedom & Responsibility
Context, not Control
Highly Aligned, Loosely Coupled
Pay Top of Market
Promotions & Development

79
 If you want to build a ship,
don't drum up the people
to gather wood, divide the
work, and give orders.
Instead, teach them to yearn
for the vast and endless sea.

-Antoine De Saint-Exupery,
Author of The Little Prince

80
The best managers figure out how to
get great outcomes by setting the
appropriate context, rather than by
trying to control their people

81
 Context, not Control
Provide the insight and understanding to enable sound decisions

Context (embrace) Control (avoid)

Strategy Top-down decision-making
Metrics Management approval
Assumptions Committees
Objectives Planning and process valued
Clearly-defined roles more than results
Knowledge of the stakes
Transparency around
decision-making

82
 Good Context
Link to company/functional goals
Relative priority (how important/how time sensitive)
Critical (needs to happen now), or
Nice to have (when you can get to it)
Level of precision & refinement
No errors (credit cards handling, etc), or
Pretty good / can correct errors (website), or
Rough (experimental)
Key stakeholders
Key metrics / definition of success

83
Managers: When one of your
talented people
does something dumb,
dont blame them

Instead,
ask yourself what context
you failed to set

84
 Managers: When you are tempted
to control your people, ask
yourself what context you could set
instead
Are you articulate and inspiring
enough about goals and strategies?

85
Why Managing Through
Context?
High performance people will do
better work if they understand the
context

86
 Investing in Context

This is why we do new employee

college, frequent department meetings,
and why we are so open internally
about strategies and results

87
 Exceptions to Context, not Control
Control can be important in emergency
No time to take long-term capacity-building view
Control can be important when someone is
still learning their area
Takes time to pick up the necessary context
Control can be important when you have the
wrong person in a role
Temporarily, no doubt

88
 Seven Aspects of our Culture
Values are what we Value
High Performance
Freedom & Responsibility
Context, not Control
Highly Aligned, Loosely Coupled
Pay Top of Market
Promotions & Development

89
Three Models of Corporate Teamwork
1. Tightly Coupled Monolith
2. Independent Silos
3. Highly Aligned, Loosely Coupled

90
 Tightly Coupled Monolith
Senior management reviews nearly all tactics
e.g., CEO reviews all job offers or advertising
Lots of x-departmental buy-in meetings
Keeping other internal groups happy has equal
precedence with pleasing customers
Mavericks get exhausted trying to innovate
Highly coordinated through centralization, but
very slow, and slowness increases with size
91
 Independent Silos
Each group executes on their objectives with
little coordination
Everyone does their own thing
Work that requires coordination suffers
Alienation and suspicion between
departments
Only works well when areas are independent
e.g., aircraft engines and blenders for GE

92
 #3 is the Netflix Choice
1. Tightly Coupled Monolith
2. Independent Silos
3. Highly Aligned, Loosely Coupled

93
 Highly Aligned, Loosely Coupled
Highly Aligned
Strategy and goals are clear, specific, broadly understood
Team interactions focused on strategy and goals, rather than tactics
Requires large investment in management time to be transparent and
articulate and perceptive
Loosely Coupled
Minimal cross-functional meetings except to get aligned on goals and
strategy
Trust between groups on tactics without previewing/approving each
one so groups can move fast
Leaders reaching out proactively for ad-hoc coordination and
perspective as appropriate
Occasional post-mortems on tactics necessary to increase alignment

94
Highly Aligned, Loosely Coupled
teamwork effectiveness
depends on
high performance people
and good context

Goal is to be
Big and Fast and Flexible

95
 Seven Aspects of our Culture
Values are what we Value
High Performance
Freedom & Responsibility
Context, not Control
Highly Aligned, Loosely Coupled
Pay Top of Market
Promotions & Development

96
 Pay Top of Market
is Core to
High Performance Culture
One outstanding employee gets more done
and costs less than two adequate employees

We endeavor to have only

outstanding employees

97
 Three Tests for Top of Market
for a Person
1. What could person get elsewhere?
2. What would we pay for replacement?
3. What would we pay to keep that person?
If they had a bigger offer elsewhere

Confidential 98
 Takes Great Judgment
Goal is to keep each employee at top of
market for that person
Pay them more than anyone else likely would
Pay them as much as a replacement would cost
Pay them as much as we would pay to keep them
if they had higher offer from elsewhere

99
 Titles Not Very Helpful
Lots of people have the title Major League
Pitcher but they are not all equally effective
Similarly, all people with the title Senior
Marketing Manager or Director of
Engineering are not equally effective
So the art of compensation is answering the
Three Tests for each employee

100
 Annual Comp Review
At many firms, when employees are hired,
market compensation applies
But at comp review time, it no longer applies!
At Netflix, market comp always applies:
Essentially, top of market comp is re-established
each year for high performing employees
At annual comp review, manager has to answer
the Three Tests for the personal market for each
of their employees
Confidential 101
 No Fixed Budgets
There are no centrally administered raise
pools each year
Instead, each manager aligns their people to
top of market each year the market will be
different in different areas

102
 Compensation Over Time
Some people will move up in comp very
quickly because their value in the marketplace
is moving up quickly, driven by increasing skills
and/or great demand for their area
Some people will stay flat because their value
in the marketplace has done that
Depends in part on inflation and economy
Always top of market, though, for that person

103
 Compensation Not Dependent
on Netflix Success
Whether Netflix is prospering or floundering,
we pay at the top of the market
Sports teams with losing records still pay talent
the market rate, to get back to winning

104
 Bad Comp Practices
Manager sets pay at Nth percentile of title-
linked compensation data
The Major League Pitcher problem
Manager cares about internal parity instead of
external market value
Fairness in comp is being true to the market
Manager gives everyone a 4% raise
Very unlikely to reflect the market

105
 When Top of Market Comp
Done Right...
We will rarely counter with higher comp when
someone is voluntarily leaving because we
have already moved comp to our max for that
person
Employees will feel they are getting paid well
relative to their other options in the market

106
 Versus Traditional Model
Traditional model is good prior year earns a
raise, independent of market
Problem is employees can get materially under- or
over-paid relative to the market, over time
When materially under-paid, employees switch
firms to take advantage of market-based pay on
hiring
When materially over-paid, employees are
trapped in current firm
Consistent market-based pay is better model
107
 Employee Success
Its pretty ingrained in our society that the size
of ones raise is the indicator of how well one
did the prior year
but for us the other factor is the outside market
Employee success is still a big factor in comp
because it influences market value
In particular, how much we would pay to keep the
person

108
 Good For Each Employee to
Understand Their Market Value
Its a healthy idea, not a traitorous one, to
understand what other firms would pay you,
by interviewing and talking to peers at other
companies
Talk with your manager about what you find in
terms of comp
Stay mindful of company confidential information

109
 Efficiency
Big salary is the most efficient form of comp
Most motivating for any given expense level
No bonuses
Instead, put all that expense into big salaries, and
give people freedom to spend their salaries as
they think best
Employees can decide how much Netflix stock
they want, versus cash

110
 No Vesting or Deferred Comp
We dont want managers to own their people
with vesting all comp is fully vested
We want managers to be responsible for creating
a great place to work, and paying at the top of
market
Employees are free to leave us anytime, without
penalty, but nearly everyone stays
Employees stay because they are passionate
about their work, and well paid, not because of a
deferred compensation system
111
 No Ranking Against Other Employees
We avoid top 30% and bottom 10%
rankings amongst employees
We dont want employees to feel competitive
with each other
We want all of our employees to be top 10%
relative to the pool of global candidates
We want employees to help each other, and
they do

112
 Seven Aspects of our Culture
High Performance
Values are what we Value
Freedom & Responsibility
Context, not Control
Highly Aligned, Loosely Coupled
Pay Top of Market
Promotions & Development

113
 In some time periods, in some
groups, there will be lots of
opportunity and growth at Netflix
Some people, through both luck and
talent, will have extraordinary career
growth

114
Baseball Analogy: Minors to Majors
Very talented people usually get to move up, but
only true for the very talented
Some luck in terms of what positions open up
and what the competition is
Some people move to other teams to get the
opportunity they want
Great teams keep their best talent
Some minor league players keep playing even
though they dont move up because they love the
game

115
 Netflix Doesnt Have to Be for Life
In some times, in some groups, there may not
be enough growth opportunity for everyone
In which case we should celebrate someone
leaving Netflix for a bigger job that we didnt
have available to offer them
If that is what the person prefers

116
 Three Necessary Conditions
for Promotion
1. Job has to be big enough
We might have an incredible manager of something, but we
dont need a director of it because job isnt big enough
If the incredible manager left, we would replace with a manager,
not with a director
2. Person has to be a superstar in current role
Could get the next level job here if applying from outside and we knew
their talents well
Could get the next level job at peer firm that knew their talents well
3. Person is an extraordinary role model of our
culture and values

117
 Timing
If a manager would promote to prevent an
employee from leaving, the manager should
promote now instead of waiting
Three tests still have to be passed
1. Job big enough
2. Superstar in current role
3. Person is an extraordinary role model of our
culture and values

118
 Development
We develop people by giving them the
opportunity to develop themselves, by
surrounding them with stunning colleagues
and giving them big challenges to work on
Mediocre colleagues or unchallenging work is
what kills progress of a persons skills

119
 Career Planning Not for Us
Formalized development is rarely effective,
and we dont try to do it
e.g., Mentor assignment, rotation around a firm,
multi-year career paths, etc.

120
 We Support Self-Improvement
High performance people are generally self-
improving through experience, observation,
introspection, reading, and discussion
As long as they have stunning colleagues and big
challenges to work on
We all try to help each other grow
We are very honest with each other

121
 We want people to manage
their own career growth,
and not rely on a corporation
for planning their careers

122
Your Economic Security is based
on your Skills and Reputation
We try hard to consistently provide
opportunity to grow both by
surrounding you with great talent

123
 Seven Aspects of our Culture
Values are what we Value
High Performance
Freedom & Responsibility
Context, not Control
Highly Aligned, Loosely Coupled
Pay Top of Market
Promotions & Development

124
 We keep improving
our culture as we grow

We try to get better

at seeking excellence

125